TEXT :: After Petitioner paid off his mortgage, his annual property taxes went unpaid. Respondent, Commissioner of State Lands, subsequently certified Petitioner’s property as delinquent. Under the applicable state statute, Respondent sent, via certified mail, a notice of delinquency to Petitioner’s property. The notice indicated that the property would be sold unless Petitioner redeemed the property. The notice, however, was returned to Respondent as “unclaimed.”
Following sale of the property, the purchaser caused a notice of detainer to be served upon Petitioner’s daughter. Subsequently, Petitioner brought suit in Arkansas state court alleging that his due process rights had been violated. The trial court granted Respondent’s motion for summary judgment and the Arkansas Supreme Court affirmed. The United States Supreme Court granted certiorari and HELD that when mailed notice is returned “unclaimed,” the government must take further practicable and reasonable steps to provide notice to a property owner before a forced sale.
The Fourteenth Amendment’s Due Process Clause provides, in part, that no state shall deprive any person of life, liberty, or property, without due process of law.” Fundamental to due process is the requirement that notice of governmental action resulting in the deprivation of property must be “reasonably calculated, under all the circumstances, to apprise [all] interested parties” of the deprivation and grant them an opportunity to be heard.
Mullane v. Central Hannover Bank & Trust Co. is the seminal case addressing the constitutional requirements for notice. In Mullane, the Court addressed whether publication in a local newspaper of judicial settlement of a common trust fund provided sufficient notice to all interested parties. Although personal service will always provide adequate notice, the Court noted that it must balance the state’s interest in timely settlement of a pending action with an individual’s interest possibly protected by the Fourteenth Amendment. Therefore, personal service of written notice is not always required. Rather, the chosen method of notice must be one that would be reasonably adopted by a person actually desirous of informing interested parties.
As to beneficiaries whose whereabouts were unknown, the Court held that publication met due process requirements because no other reasonable method could have provided more adequate notice. However, as to beneficiaries whose whereabouts were known, publication of the trust’s settlement did not meet due process requirements. In drawing this distinction between different classes of interested parties, the Court emphasized that due process requirements cannot be met by theoretically sufficient methods, but that sufficiency will depend on the specific facts in each particular instance.
In Mennonite Board of Missions v. Adams, the Court extended to sophisticated creditors the same due process protections provided for trust beneficiaries in Mullane by holding that publication and posting did not provide constitutionally sufficient notice to a real property mortgagee. The Mennonite Court relied on the Mullane rule, which requires that the chosen method of notice be reasonably calculated under all circumstances to apprise all interested parties of the pendency of state action. The Court refined the requirements of the Mullane rule, however, providing that the sufficiency of the method of notice does not depend on an interested party’s ability to safeguard its own interests.
Although the mortgagee in Mennonite could have, and perhaps should have, learned of the pending tax sale of the property, the Court concluded that the state was not relieved of its obligation to provide constitutionally sufficient notice. Rather, the Court indicated that the state had to make reasonably diligent efforts to ascertain the mortgagee’s mailing address. Thus, by focusing on the fact that the mortgagee did not apprise itself of the property’s situation, the Court reinforced the notion that due process requires, at a minimum, that states choose a method of notice that is reasonably certain to provide actual notice to interested parties. Therefore, in some situations, a state may have to take additional steps to meet this requirement.
November 2014, Vol. 66, No. 6
Lily Kahng, The Taxation of Intellectual Capital